“Honest Belief” Defense Remains Unresolved In California

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The California Top Court declined to determine if the “honest belief” defense to discrimination and retaliation claims applies under California law. Rather, in Richey v. Autonation, Corporation., a legal court punted around the decision and located that the arbitrator’s underlying decision took it’s origin from “overwhelming” proof of an employee’s misconduct which the arbitrator’s use of the “honest belief” defense was “not prejudicial,” if error whatsoever. While underscoring the significance of well-crafted arbitration contracts, the choice leaves the low courts liberated to achieve sporadic holdings with that important issue.

The “honest belief” defense – that we blogged about earlier – absolves employers of liability for discrimination or retaliation when a bad decision a good worker is dependant on a genuine, but mistaken belief about conduct by an employee’s misconduct. The Richey situation appeared such as the perfect opportunity decide the viability from the rule. For the reason that situation, an worker required leave underneath the California Family Legal rights Act (CFRA) for any back injuries he endured while moving furniture in the house. Autonation’s CFRA policy prohibited Richey from working during CFRA leave also it advised him of this policy inside a letter and requested him to with any queries. Richey never did that. Rather, throughout his leave, he positively labored on opening a brand new restaurant. Employees of Autonation who investigated the problem, observed Richey sweeping, hanging an indication having a hammer and dealing the leading counter of the restaurant – activities which undermined the veracity of his declare that he needed leave for any back injuries. Autonation then ended Richey according to its thought that he was working as he shouldn’t happen to be, even though he was with an approved CFRA leave.

Richey declared arbitration of numerous claims, together with a declare that Autonation violated the CFRA by terminating him before his CFRA leave expired. The arbitrator arrived at two critical findings: (1) Autonation had an “”honest belief” that Richey violated its CFRA policy while working throughout an active leave and (2) there is “overwhelming” evidence that Richey was fired for “non-discriminatory reasons.” Richey filed a motion to vacate the arbitrator’s award in the court and that he maintained the arbitrator’s use of the “honest belief” defense was the wrong legal standard. The trial court confirmed the award, however the Court of Appeal agreed and vacated it.

The California Top Court, however, found unanimously that whether or not the arbitrator’s use of that rule was error, it wasn’t sufficient to overturn an arbitrator’s award. Even without the an arbitration agreement which enables judicial review for “legal error,” the California Arbitration Act (CAA) only enables for overview of an arbitral award in very narrow conditions, for example once the arbitrator is “corrupt,” as he partcipates in “prejudicial misconduct, as he exceeds his forces, or once the award is “procured by corruption, fraud or undue means.” A Legal Court recognized the general rule is the fact that arbitral awards can’t be reviewed for legal or factual errors, so long as an arbitrator issues an itemized decision that reveals the fundamental findings which it’s based and doesn’t “ignore a statutory mandate.”

It was not this type of situation. As the Court recognized that there’s debated regarding the validity from the “honest belief” defense in California, evidence was obvious within this situation that Richey violated Autonation’s CFRA policy and, consequently, the validity or invalidity of this defense was irrelevant. Mentioned otherwise, the arbitrator “would have in all probability made that finding [that Richey was correctly ended] whatever the . . . employer’s honest belief.”

The Take-Away

So, exactly what does this suggest for California employers. For just one factor, employers will need to wait to find out if the “honest belief” defense is validated under California law. Federal courts deciding the problem under federal discrimination and retaliation laws and regulations have generally upheld the defense, though there are several decisions that have not. But because of the speed where California courts move, it is possibly another 5 years or even more before concern is resolved. For now, the lowers courts is going to be liberated to achieve sporadic decisions around the issue.

The most crucial takeaway for California employers is the fact that arbitration contracts need to be checked to make sure that they don’t permit review with a court according to “legal error” or anything similar to that. The need for arbitration (and also the danger at occasions) is the fact that arbitrator’s decisions can rarely, when, be challenged. If the arbitration agreement enables courts to second-guess the arbitrator’s decision-making process, that significant benefit sheds.

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